Posts tagged ‘GDP’

Getting the Feds to 20% of GDP

I thought this Federal budget proposal by TJIC was interesting for a couple of reasons.  Not the least of which is the sight of TJIC trying to be reasonable and compromising.  Libertarians (as with other political extremists, and make no mistake we are extremists) tend to skew between those who want anarcho-capitalism and will accept no less and those who seek for improvements at the margin, believing that the world is only going to change so much.  I would normally put TJIC in category 1 but it is interesting to seem him delve into category 2.  Even I, normally a category 2 guy, can't totally get behind this plan as there are just two many programs, in the words of David Stockman, that need to be zeroed out.

Wal-Mart and Income Inequality

First, I have not doubt that income inequality--  in whatever way the folks who care about such things measure it -- has increased.  The analysis that has been making the rounds of liberal blogs show the rich "capturing a higher share" of total output.  The very terminology here reveals their faulty core assumption, treating wealth as a zero-sum that must be grabbed and fought for and can only be gained to someone else's disadvantage.  They always write about incomes as if GDP is a sort of natural fountain in the desert, and the piggy rich crowd in too close to get more than their fair share of water from the fountain.

This is silly.  Wealth is created from the minds of human beings, and there are human minds that create far more wealth than others, and are able to keep some of that wealth for themselves as a reward.  I say "some" because even the richest people tend to keep only a small percentage of the wealth they create.  Sum up the benefits we all get from our iPods and iPhones and iPads, and the total number dwarfs what Apple shareholders have made from these devices.

Anyway, the actual point of this post was to revisit the notion that there are different inflation rates for the rich and poor (via Carpe Diem) that may be skewing income inequality numbers

Using scanner data on household consumption of non-durable goods between 1994 and 2005, we document that the relative prices of low-quality products that are consumed disproportionately by low-income households were falling over this period. This implies that non-durable inflation for the 10th percentile of the income distribution has only been 4.3 percent between 1994 and 2005 (0.4 percent per annum), while the non-durable inflation for the 90th percentile has been 11.9 percent (1.0 percent annually), and 13.4 percent (1.2 percent annually) for the richest 5 percent of households in the sample (see chart above)."...

"A large literature has focused on the rising inequality observed in official statistics, but have mostly abstracted from the fact that these official measures are based on a single price index for a representative consumer. This assumption is not crucial in a world with a stationary relative price distribution or where an identical basket of goods is consumed by different income groups. However, using household data on non-durable consumption, we document that the relative prices of low-quality products that are consumed disproportionately by low-income consumers have been falling over this period.

This fact implies that measured against the prices of products that poorer consumers actually buy, their "real" incomes have been rising steadily. As a consequence, we find that around half of the increase in conventional inequality measures during 1994"“2005 is the result of using the same price index for non-durable goods across different income groups. Moreover, given that the increase in price dispersion does not seem to be specific to our sample or time period, the overstatement in the increases in inequality from official measures can be even more significant, changing our view of how progress has been distributed in recent decades substantially."

The price of a night at the Four Seasons has gone up more than the price of a shirt at Wal-Mart.


This post and this post came up back to back in my feed reader this morning.  The first explored per capita GDP between Greece and Germany, and wonders why the published numbers can be so close when visual evidence is that the average Greek is far less prosperous than the average German.  Brian Caplan explains the largest difference between Greece and Germany in terms of public sector productivity, with 10% of the workforce in Germany working for the state while a third of Greeks do so.

Knowing the Germans, it's easy to believe that its government employees accomplish as much as the Greeks' despite their smaller population share.  This implies that 25% of the Greek labor force is, contrary to official stats, producing nothing.

So using Sumner's other numbers - and assuming output is roughly proportional to labor force - per-capita GDP is more than 50% higher in Germany than Greece.  First-hand observation tells me that's still an understatement, but it still closes a big chunk of the gap between official stats and reality.  How's that for a mental image?

UPDATE: The NY Times apparently overstated the 1/3 figure, see here.

Right after reading that piece, I read this from Jim O'Brien via Tad DeHaven:

Back in 1990, Halstein Stralberg coined the term "automation refugees" to describe Postal Service mail processing employees who were assigned to manual operations when automation eliminated the work they had been doing. Since the Postal Service couldn't lay off these employees, they had to be given something to do, and manual processing seemed to have an inexhaustible capacity to absorb employees by the simple expedient of reducing its productivity. The result was a sharp decline in mail processing productivity and a sharp increase in mail processing costs for Periodicals class. Periodicals class cost coverage has declined steadily since that time.

O'Brien then tells of visiting seventeen mail processing facilities as part of a Joint Mail Processing Task Force in 1998. During those visits he noted that the periodical sorting machines always happened to be down even though the machines were supposed to be operating seventeen hours a day. Although the machines weren't working, manual operations were always up and running.

A decade later, O'Brien points out that the situation apparently hasn't changed:

More Periodicals mail is manually processed than ever, and manual productivity continues to decline. Periodicals Class now only covers 75% of its costs. How can this dismal pattern of declining productivity and rising costs continue more than two decades after it was first identified, especially when the Postal Service has invested millions of dollars in flats automation equipment?

Years ago, I briefly consulted to the SNCF, the French national railroad.  I say briefly, because thought they technically asked us to benchmark them against US firms, its clear they did not really want to hear the results.  The one figure that sticks in my mind is that they had something like 100,000 freight cars, but 125,000 freight car maintenance employees.  I remember observing to a highly unamused SNCF executive that they could assign one maintenance worker to his very own freight car and still lay off 20% of the staff.  And apparently France is an order of magnitude better on stuff like this than Greece.

Economic Alchemy

So Obama just signed a new "jobs" package

It's the first of several such measures Democrats have promised this election year to address the public's top worry: jobs. The measure includes about $18 billion in tax breaks and pumps $20 billion into highway and transit programs.

This is fascinating to me.  Let's take it in reverse order, starting with the $20 billion in new spending.  We are going to take 0.14% of the GDP out of some people's hands, who presumably thought they were employing the money productively, and put it into some other people's hands, and that is going to be a net jobs creator? **  Does this Keynesian myth really make sense to thoughtful people any more?

OK, but lets accept the logic - somehow if the government spends the money, it is more stimulative than if private people spend the money.  But then the whole package is contradictory, because it includes $18 billion in tax breaks.   Isn't that just taking money away from that great optimizer, the US Government, and handing it back to yucky old individuals who might just save it or pay down debt or something equally silly in the Keynesian world?

**Postscript- to answer a frequent comment I get, it does not matter if it is borrowed or taxed.  Either way it takes money from some private purpose.  There is only so much capital in the capital markets, and more government borrowing squeezes out private borrowing.

Is Greece the New Montreal?

Hosting the Olympics practically bankrupted Montreal.  Via Megan McArdle, Victor Matheson argues that the current Greek financial problems may have stemmed from hosting the Olympics.

Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.

But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.

Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.

Hosting Olymics is just a super-sized version of the fallacy that causes governments to fund billion dollar sports stadiums.

Are CO2 Initiatives Already Working?

Cameron Scott argues this when he says:

It's funny how green-haters accuse greens of being catastrophists, and then argue that cutting carbon emissions will destroy our economy and send us back to the Dark Ages. (See the trailer of Phelem McAleer's Not Evil Just Wrong for a prime example.)

Well, the last pooh-pooh is on them: It turns out we're already cutting emissions in the United States. Sure, some of that is due to a sluggish economy. But negative economic circumstances don't account for the 9 percent reduction in carbon emissions since 2007. In fact, the amount of carbon dioxide produced for every dollar of economic output declined by 3.8 percent in 2008.

I responded:

I really wish you would apply your analytical abilities to equities so I would have some way to bet against you.

Had you looked, you would see that the US has been reducing the CO2 intensity for a unit of economic output for decades. Here is the first source I found online but there are zillions.  In terms of improvement, the US has done better on this metric in the last 20 years than nearly any other country in the world, and just as well as the best (e.g. Germany)

So what you tell is not a new story, and has nothing to do with recent governmental dictats or pleas by environmentalists and everything to do with the ongoing incentives of individuals and businesses to reduce costs and be more efficient.

The reason our total Co2 output has not decreased is that while CO2 per unit of GDP (I will call this CO2 efficiency) has improved 2-4 percent per year, our GDP has grown the same rate or faster. So our overall CO2 output is flat to up (and has actually been down the last few years). One of the main reasons Europe has done better than the US in total CO2 reductions is not improvements in CO2 efficiency, but because their economies have lagged. They bent over backwards in Kyoto to make 1990 the baseline year, so they could include the horrible economies of Russia and East Germany which were in the process of crashing, thus giving them an automatic CO2 reduction for nothing.

Anyway, just look at your own numbers. In the year before, we got about 3% improvement in Co2 efficiency and had about 3% economic growth so CO2 output was flat to down. Last year we had about 3% improvement in Co2 efficiency and the economy was down a lot and thus CO2 was down a lot. When there are two variables in a function, and only one is changing, most logical people attribute the change in output of the function (ie changes in total CO2 output) to the variable that changed (ie economic growth). You, for some reason, attribute changes in the output to the variable (co2 efficiency improvements) which basically remained unchanged. Nice analysis.

You can even see it in your numbers. If CO2 efficiency is up 3.8 percent and Co2 output is down 9 percent, then that means the economic growth/size component has to be down 5.4% (.91/.962 - 1). So almost 60% of the "improvement" is due to a very bad recession and 10% unemployment, but you attribute it to the unchanging 40% piece.

Did anyone in the environmental movement study math or economics?

So Why Are We Benchmarking Health Care v. France?

This is awesome, from Carpe Diem:


On a purchasing power parity basis, France, Japan, and Germany would all be the poorest states in the United States, based on per capita GDP.  People on the coasts don't benchmark their education or health care spending against Mississippi, except perhaps to make the case that Mississippi is spending too little.  So why do they benchmark their spending against Germany or France.  Of course we spend more on health care per capita - we spend more than these countries per capita on everything from TV's to cars to movie tickets.

A Quick Thought on Health Care

It is often said that one of the "problems" with American health care is that we spend far more on health care as a percent of GDP than other nations.  But why is this necessarily a problem?

The US is the wealthiest nation on Earth, top to bottom.  At every level of society, except perhaps for a few recent immigrants, people in this country are wealthier than their peers in a similar income quintile in another country, even Europe.  So it is not surprising that basic needs, like food and housing, might represent a smaller percentage of GDP here than in other nations.  Despite all the efforts of McDonalds and the Country Buffet to change things, there is only so much food we can consume, only so much living space we need, only so many cars we can drive at one time.

As these basics fall as a percentage of our income, something must gain.  It could be savings, but it could also be other spending where incremental outlays return percieved incremental benefits.  And so, why not health care?  What could possibly be more important than extension of our lives and/or the improvement of the quality of our living?  If we as a nation choose to spend our extra wealth on such things, is this really a bug, or a feature?

Update: Yes, I know, the problem is that we aren't really always able to make this decision as individuals optimizing our own tradeoffs.  We are too often forced to accept someone else's tradeoff.  Unfortunately, this problem is only going to get worse under any plan Congress is currently considering.  Someone else who is not you and doesn't even know you will decide how much a procedure is worth for you.

A Brief Thought on Wealth

One of the pieces of data that turns out to be nearly impossible to find is a direct comparison of the median income by quartile on a PPP basis between countries.  In other words, how does the income of, say, the US lower quartile compare to other countries?  There are a zillion sites with metrics of income inequality and GINI indexes and such, but to my mind these are meaningless.  OK, the poor in the US are much less wealthy than the rich in the US, but how do they compare to the poor of other nations.  The few studies I have seen have reluctantly (remember, these are leftish academics) admitted that the US poor do pretty well vs. the poor in other nations.  Here is data for US vs. Europe.

I got a lot of grief a few years ago when I said, related to Kwanzaa:

Every African-American should wake up each morning and say "I give
thanks that my ancestors suffered the horrors of the slavery passage,
suffered the indignity and humiliation of slavery, and suffered the
poverty and injustices of the post-war South so that I, today, can be
here, in this country, infinitely more free, healthier, safer and
better off financially than I would have been in Africa."

I wanted to actually make this comparison more real.  I used the CIA Factbook to estimate the share of per capita GDP on a PPP basis earned by the top decile, or top 10% wealthiest individuals, in a number of African nations (Example page here for Ethiopia -- calculation would be [25.5%/10%] x $700 per capita). 

So here are the results:

  • Ethiopia top 10%:      $1,785
  • Nigeria top 10%:        $6,972
  • Zimbabwe top 10%:    $800

Hopefuly this is enough of a sample to give you an idea of the range.  Only South Africa is a real outlier from this range.  Now, by the same methodology and source, here is the average share of the per capita GDP for the bottom 10% of earners in the US:

  • United States bottom 10%:   $9,160
  • United States African-American avg (est):  $32,060**

Wow!  This means that the average person in the bottom 10% in the US, most of whom we classify as below the poverty line, would easily, by multiples and orders of magnitude, be in the top 10% richest people in most African nations.   And the surviving decedents of those poor folks who got dragged to the US in slavery would be the Bill Gateses of their mother countries.

The point being, of course, that the size of the pie is typically more important than how you divide it up.  And it is nearly an axiom that government efforts to divide the pie more evenly almost always make it smaller.

** estimated based on 2006 median black household wages being about 70% of the US median household wages.  Yes, I know, we are wildly mixing apples and oranges here to get African American share of GDP per capita in the US, but its in the ballpark -- certainly close enough to make my basic point.  And yes, I know there are flaws in measuring income across countries even on a PPP basis.  If anyone knows of how to get this data more directly, please email me.

Save Our Industry, The Economy Depends on It

I have been on a Civil War reading binge lately, which began when I read "Time on the Cross", which is a really interesting economic analysis of American slavery.  Since I have read a number of other Civil War and Ante-Bellum history books, including James McPherson's excellent one volume Civil War history.

I was struck in several of these books by the reaction of British textile manufacturers to the war and, more specifically, the informal southern embargo of cotton exports in 1860-61.  These textile producers screamed bloody murder to the British government, demanding that they recognize the Confederacy and intervene on their behalf, claiming that the lack of cotton would doom their industry and thereby doom the whole country.  On its face, this was a credible argument, as textiles probably made up more of the British GDP at the time than any three or four industries account for in the US today. 

Fortunately, the British chose not to intervene, and risked the economic consequences of not supporting the textile industry by jumping into the American Civil War.  As it turned out, the British economy was fine, and in fact even the textile industry was fine as well, as demand was still high and other sources around the world stepped up (because of the higher prices that resulted from the Southern boycott) with increased cotton supplies.

Keeping Some Perspective

If past presidential elections are any guide, by the time this one is over, it will have been said that this economy is the worst economy since the Great Depression.  W. Michael Cox and Richard Alm of the Dallas Fed write a fabulous article in the American putting current US economic conditions in historic context:

When a presidential election year collides
with iffy economic times, the public's view of the U.S. economy turns
gloomy. Perspective shrinks in favor of short-term assessments that
focus on such unpleasant realities as falling job counts, sluggish GDP
growth, uncertain incomes, rising oil and food prices, subprime
mortgage woes, and wobbly financial markets.

Taken together, it's enough to shake our
faith in American progress. The best path to reviving that faith lies
in gaining some perspective"” getting out of the short-term rut, casting
off the blinders that focus us on what will turn out to be mere
footnotes in a longer-term march of progress. Once we do that, we see
the U.S. economy, a $14 trillion behemoth, is doing quite
well, thank you very much.

I can't really excerpt the article and do it justice, but suffice it to say that you won't see much of this in any Obama speeches this year.  Here are two charts from the article I particularly liked:


Of course, the rejoinder will be, but what about the poor?  Well...


Go read it all in advance of the campaign season.

Subsidizing Real Estate Developers Ruled to be Clearly in the Public Interest

The city of Phoenix's $97 million subsidy for the developers of a new Phoenix shopping mall has been ruled by a local judge as being "'undoubtedly' in the public interest."  Even weirder, the developers lawyers are so mad at having their largess questioned that they are demanding the Goldwater Institute pay them $600,000 in attorneys fees as punishment for even questioning whether funding private mall parking lots that would have been built anyway is really in the public interest.

The subsidy, which I described in more detail here, provides $97 million for the construction of a parking garage at a new mall in North Phoenix, with the only condition being that the mall owners provide free parking in the garage to the public.  I can think of only three reasons this would be in the public interest:

1.  Without the subsidy, the mall might not provide enough parking
2.  Without the subsidy, the mall might charge for parking
3.  The parking garage could serve other surrounding businesses or homes within walking distance

Now, some of you on the coasts may be confused about this, so let me give you one other piece of background.  There are hundreds of shopping malls in the Phoenix area, from local strip malls to huge mega-malls of the type in this case.  At least 99.9% of the parking at all of these malls has been paid for with private funds.   Every one of these has plenty of parking.  This might not be the case in Boston, where land costs are high, but here in Phoenix, land is relatively cheap and malls are plentiful -- If I can't find a parking space, I would just go to a different place to shop.

Further, do you know the total number of these spaces at mall in Phoenix that are not free?  Zero.  OK, there may be one mall downtown that charges money to park, but for any mall in the area in which this one is being constructed, it would be insane to charge to park.  There are just too many competitor malls with free parking.

Finally, as to #3, look at the satellite view here.  Enough said. 

So the city paid $97 million in return for nothing of value, or at least nothing of value that the mall owners would not have provided on their own out of their own self-interest.  The only thing that I can identify the $97 million bought was possibly influencing the decision of one store (Nordstrom's) to locate in this particular development rather than 1 mile away, over the city line in another development planned in the City of Scottsdale.

About the numbers:   I really can't get away without taking on this statement in the same article:

According to its developers, CityNorth is expected to generate $1.9 billion in annual economic activity

In 2005, the metro Phoenix area had a GDP of $160 billion dollar.  The retail component of this is about $12 billion.  So this one mall / real estate project in one small part of Phoenix, one of hundreds just like it all over town, will increase our city's GDP by over 1% and in particular increase the city's retail output by 16%.  Sure.  I really wish our local paper would be just a tiny bit more credulous about printing these numbers from promoter's press releases.

Open Your Wallets Again, Arizona

From a reader comes this story of Arizona looking to the public trough to get funds to lure another SuperBowl.  I can say from experience now that Superbowl week is made up mostly of private corporate and celebrity parties that the unwashed locals like myself are either a) not allowed to attend at all or b) can attend only by ponying up $1000 or more.  Not being resentful or a leftist, I couldn't really care less about the parties being near by.  However, my opinion changes real fast if my tax dollars are required to pay for them:

Super Bowl organizers will try to nail down another big game for Arizona, possibly as early as 2012.

But for the state to stay competitive, taxpayers need to shoulder the
majority of game costs, organizers say. And the organizers plan to
lobby for legislation to accomplish that.

The weeklong celebration culminating with Sunday's Super Bowl XLII cost
the local Host Committee about $17 million. The private sector,
including such big contributors as the Fort McDowell Yavapai Nation and
the Thunderbirds, bankrolled more than 80 percent, while state and
local agencies chipped in the balance.

But with a slumping economy making fundraising a challenge, the Arizona
Super Bowl Host Committee, the Arizona Cardinals organization and
Valley business leaders want see that ratio reversed, with public
dollars financing the bulk of the effort.

Don't you love the last sentence?  An exactly equivalent way to state this is "people have other priorities for their own money and refuse to give it up voluntarily, particularly in difficult economic times, so we need the state to take it by force."

No one yet knows how much this year's Super Bowl will fatten state
coffers, though organizers project the game created more than $400
million in spending. An economic-impact study won't be out for at least
a couple of months.

Bullshit.  Every major economic study not conducted by the management of a professional sports team has shown nearly zero impact from such events.  Here is the Seattle NBA team admitting they have no economic impactHere is yet another economic study to the same effect.

Here is my challenge:  Take the Phoenix-area GDP for this Jan-Feb, take out the growth trend line (which can be found in year-over-year comparisons of previous months) and then compare it to the GDP for Jan-Feb 2007.  I bet you whatever you care to bet you cannot find an additional $400 million. 

Can We Get Over Our Obsession with Agriculture?

Dan Griswold writes today about our depressing continued subsidization of the agriculture business, up to and including gutting any reasonable energy policy in favor of subsidizing corn farmers.

Beyond shear inertia and the fact that Iowa leads the primaries, can anyone really explain this.  For God sakes, we have a cabinet-level position for agriculture, and, in case of a massive Cylon attack, the secretary of agriculture is 8th in line for the Presidency.

Here is some perspective:  Agriculture, even if you include fishing and forestry, accounts for 1.1% of US GDP.  $122 billion of total value added.  Computers and electronic parts is a larger industry.  As is entertainment and recreation.  As is the restaurant industry.  Heck, Exxon and Wal-Mart are probably more deserving of cabinet positions. 

We Just Don't Have Enough Taxes

I propose a survey.  We will ask 500 CEO's of large company's and 500 small business owners just one question

1.  Do you agree/disagree with the following statement:  In order to make my business more competitive in international markets, the federal government needs to raise taxes and expand its scope

How many out of the 1000 would answer "Agree?"  Well, at least the number won't be zero, as long as you ask the NY Times:

"¦the taxes collected last year by federal, state and local governments in the
United States amounted to 28.2 percent of gross domestic product. That
rate was one of the lowest among wealthy countries - about five
percentage points of GDP lower than Canada's, and more than eight
points lower than New Zealand's. "¦the meager tax take leaves the United
States ill prepared to compete. From universal health insurance to
decent unemployment insurance, other rich nations provide their
citizens benefits that the U.S. government simply cannot afford.
"¦revenue will prove too low to face the challenges ahead.

I love the part about unemployment insurance particularly -- other countries are more competitive than we are because they pay their citizens more not to work.  Huh?  Daniel Mitchel responds:

The editorial conveniently forgets to explain, though, how America is
less competitive because of supposedly inadequate taxation. Is it that
our per capita GDP is lower than our higher-taxed neighbors in Europe?
No, America's per capita GDP is considerably higher. Is it that our disposable income is lower? It turns out that Americans enjoy a huge advantage in this measure. Is our economy not keeping pace? Interesting thought, but America's been out-performing Europe for a long time. Could higher rates of unemployment be a sign of American weakness? Nice theory, but the data show better job numbers in the United States.

I also would point out the general direction of net immigration, which has always been towards the US from nearly every country in the world rather than the other direction.

The favorite argument du jour for more taxes is that the US has more income inequality than other countries.  Well, that is sort of true.  Our rich are richer than theirs.  But are our poor poorer?  In fact, as I posted here, the data (from a liberal think tank) shows that they are not.   The poor in European countries have a higher percentage of a lower median wage.  When you normalize European income distribution numbers to percentages of the US median wage, you can see our poor do at least as well as those in Europe, while our middle class and rich do better.


The US poor still trail countries like Switzerland, but that is because of very different immigration realities.  The US numbers for the bottom quartile are weighed down by tens of millions of recent immigrants (both legal and not) whereas those of Switzerland and Norway are not.  If you left out recent immigrants, my guess is that the US poor would be the richest in the world.

Is Belgium Collapsing?

The amount I know about Belgium could probably be written on a post card (except for its role in military history, which is substantial due to its location and its famously brave stand against Germany in the opening act of WWI).  So this article about the tremendous split developing between French (Wallonia) and Flemish (Flanders) Belgium was new to me.  In particular, I noted this:

Every year 6.6% of Flanders' GDP is spent on welfare in Wallonia.
The money has not helped the Walloons but turned them into welfare
addicts. Belgium is a case study of how socialist redistribution
schemes lead to economic perversions.

It appears that 60% of Wallonians are either unemployed or on the government payroll (roughly the same thing in Europe), vs. just 28% in Flanders.  And this despite the fact that Brussels and the EU HQ are in Flanders.

Chapter 5: Computer Models and Predicting Future Climate (Skeptics Guide to Global Warming)

The table of contents for the rest of this paper, . 4A Layman's Guide to Anthropogenic Global Warming (AGW) is here Free pdf of this Climate Skepticism paper is here and print version is sold at cost here

We have gotten well into this paper, and we still have not
discussed what is perhaps the most problematic aspect of AGW research:
the computer models.

If an economist came up with a computer model that he claimed could predict
the market value of every house in the world in the year 2106 within $1,000,
would you believe him?  No, you would say he was nuts -- there is way too
much uncertainty and complexity.  Climate, of course, is not the same as
housing prices.  It is in fact, much, much more complex and more difficult
to predict.  There is nothing wrong with trying to predict the complex and
chaotic.  But there is a certain sense of hubris in believing that one has
succeeded with the kind of 95% certainty figures used by the IPCC.

All climate forecasting models are created by a pretty insular and
incestuous climate science community that seems to compete to see who can come
up with the most dire forecast.  Certainly there are financial incentives
to be as aggressive as possible in forecasting climate change, since funding
dollars tend to get channeled to those who are the most dramatic.
The global warming community spends a lot of time with ad hominem attacks
on skeptics, usually accusing them of being in the pay of oil and power
companies, but they all know that their own funding in turn would dry up
rapidly if they were to show any bit of skepticism in their own work.

The details of these models is beyond the scope of this paper.
However, it is important to understand how they work in broad outlines.

The modelers begin with certain assumptions about climate that they build
into the model.  For example, the computers themselves don't somehow
decide if CO2 is a more important forcing on the climate than solar activity "“
the modelers, by the assumptions the feed into the model, decide these
things.  The models return the result that CO2 is the most important
driver of climate in the coming century because their programmers built them
with that assumption, not because the model somehow sorts through different
inputs and comes up with the key drivers on its own.

Because the models have been built to test man's possible impact on the
climate via greenhouse gas emissions, they begin with an econometric forecast
of world economic growth, and, based upon assumptions about fuel sources and
efficiencies, they convert this economic growth into emissions forecasts.
The models generally contain subroutines that calculate, again based upon a
variety of assumptions, how man-made CO2 plus other inputs will change the
atmospheric CO2 concentration.  Then, via assumptions about climate
sensitivity to CO2 and various feedback loops programmed in, the models will
create forecasts of temperatures, precipitation, etc.  These models,
depending on their complexity, will show regional variations in many of these
variables.  Finally, the models are tuned so that they better match
history, in theory making them more accurate for the future.

One should note that while the IPCC asked modelers to look at a series of
different cases, the only substantial difference between these cases is the
volume of CO2 and other greenhouse gasses produced.  In other words, the
only sensitivity the IPCC seriously modeled was on levels of CO2.  No
other contingency "“ e.g. potential variations in global temperature sensitivity
to CO2, solar output, land use "“ were considered.  This should give you an
idea of how hard-wired the anthropogenic causation is in the IPCC process.

In this section, I will begin by discussing the models' basic assumptions
about the climate.  I will then discuss the econometric forecasts they are
founded on, the assumptions about CO2 sensitivity and feedback processes, and
finally model tuning and their ability to match history.

The Dangers in Modeling Complex Systems

At any one time, thousands of people are being paid literally millions of
dollars on Wall Street to try to model the behavior of various stock indices
and commodity prices.  The total brain power and money power thrown over
the last 50 years at trying to build an accurate predictive model for financial
markets literally dwarfs, by a factor of 100 or more, the cumulative resources
spent to date on long-term climate modeling.  Financial markets are
incredibly complex, and they are driven by hundreds of variables.
Interest rates, corporate profits, loan default rates, mortgage refinance
rates, real estate prices, GDP growth, exchange rates, etc. all tend to drive
the behavior of financial markets.  And no one has cracked the code.
Sure, some people have built successful short-term trading models, but people
have mostly lost their shirts when they have tried to make long-term bets based
on computer financial models that beautifully matched history but failed to
accurately predict the future.

How is it possible that a model that accurately represents the past fails to
accurately predict the future?  Financial modelers, like climate modelers,
look to history in building their models.  Again, like climate modelers,
they rely both on theory (e.g. higher interest rates should generally mean
lower stock prices) as well as observed correlations in the historic data
set.  The problem they meet, the problem that every modeler meets but most
especially the climate modeler, is that while it is easy to use various
analysis tools to find correlations in the data, there is often nothing that
will tell you if there is really a causal relationship, and which way the
causality runs. For example, one might observe that interest rates and exchange
rates move together.  Are interest rate changes leading to exchange rate
adjustments, or vice versa?  Or, in fact, are they both caused by a third
variable?  Or is their observed correlation merely coincidence?

It was once observed that if an old AFL football team wins the Superbowl, a
bear market will ensue on Wall Street in the next year, while an NFL team
victory presaged a bull market.  As of 1997, this correlation held for 28
of the last 31 years, a far better prediction record than that of any Wall
Street analyst.  But of course this correlation was spurious, and in the
next 4 years it was wrong every time.  Had someone built a financial model
on this indicator, it would have looked great when he ran it against history,
but he would have lost his shirt using it. 

Want a better prediction record?  For seventeen straight US
presidential election cycles, from 1936 to 2000, the winner of the election was
accurately predicted by"¦the Washington Redskins.  In particular, if the
Redskins won their last home game before the election, the party that occupies
the White House holds it in the election.  Otherwise, if the Redskins
lose, the opposition party wins.  Seventeen in a row!  R-squared of
one!  Success against odds of 131,072:1 of guessing all 17 right.
But of course, the input was spurious, and in 2004, soon after this
relationship made the rounds of the Internet, the algorithm failed.

This is why we spent so much time in the previous chapter on evaluating
historic correlations between CO2 and temperature.  Because the models are
built on an assumption that not only is temperature strongly correlated with
CO2, but that temperature is historically highly stable without this outside
anthropogenic forcing.  If there are problems with this assumed causation,
which we saw there are, then there in turn are major inherent problems with the
models themselves.   As climate scientist Syun-Ichi Akasofu of the
International Arctic Research Center at University of Alaska Fairbanks wrote:

The computers are "taught" that the temperature
rise during the last hundred years is due mostly to the greenhouse effect. If
the truth is that only about 10% of the present warming is caused by the
greenhouse effect, the computer code must be rewritten

Do Model Outputs Constitute Scientific Proof?

Remember what I said earlier:  The models produce the result that there
will be a lot of anthropogenic global warming in the future because they are
programmed to reach this result.  In the media, the models are used as a
sort of scientific money laundering scheme.  In money laundering, cash
from illegal origins (such as smuggling narcotics) is fed into a business that
then repays the money back to the criminal as a salary or consulting fee or
some other type of seemingly legitimate transaction.  The money he gets
back is exactly the same money, but instead of just appearing out of nowhere, it
now has a paper-trail and appears more legitimate.  The money has been

In the same way, assumptions of dubious quality or certainty that presuppose
AGW beyond the bounds of anything we have see historically are plugged into the
models, and, shazam, the models say that there will be a lot of anthropogenic
global warming.  These dubious assumptions, which are pulled out of thin
air, are laundered by being passed through these complex black boxes we call
climate models and suddenly the results are somehow scientific proof of
AGW.  The quality hasn't changed, but the paper trail looks better, at
least in the press.  The assumptions begin as guesses of dubious quality
and come out laundered at "settled science."  Climate
Scientists Garth Paltridge wrote

It needs to be understood that any reasonable
simulation even of present climate requires computer models to be tuned. They contain
parameters (that is, pieces of input information) whose numerical values are
selected primarily to give the right answer about today's climate rather than
because of some actual measurement. This was particularly so in the
mid-eighties. The problem with tuning is that it makes any prediction of
conditions different from those of the present far less believable. Even today
the disease of "tuneable parameters" is still rampant in climate
models, although fairly well hidden and not much spoken of in polite society.
The scientifically-inclined reader might try sometime asking a climate
researcher just how many such parameters there are in his or her latest model.
The reader will find there are apparently lots of reasons why such a question
is ridiculous, or if not ridiculous then irrelevant, and if not irrelevant then
unimportant. Certainly the enquirer will come away having been made to feel

Econometrics and
CO2 Forecasts

The IPCC has never been able to choose a particular climate model it thinks
is best.  Instead, it aggregates ten or twelve of them and averages their
results, hoping that if there are errors in the climate models, they will
average out somehow (forgetting that systematic errors don't average out, as we
discussed earlier in the context of historic temperature
reconstructions).  The one thing the IPCC does do to bring some order to
all this is to establish baseline econometric and emissions scenarios for all
the teams to feed into the front end of their models.  That way, for a given
forecast case, they know variation in model output is due to differing
climate-related assumptions rather than differing economic assumptions.

But a funny thing happens when one tries to make an economic growth forecast
for 100-year periods, as the IPCC has: Very small changes in assumptions make
enormous differences.  Here is a simple example.  An economy that
grows by 3% per year will be 19x larger in 100 years.  However, if that
economy were to grow instead by 4% rather than 3%, it will be 51x larger in 100
years.  So a change in the growth rate by one percentage point yields a
final size nearly 2.7 times larger.   The same is true with
forecasting CO2 growth "“ a very small change in assumptions can lead to very
large differences in absolute production.

After release of the 3rd IPCC report in 2001, researchers Ian
Castles, formerly the head of Australia's national office of statistics, and
David Henderson of the Westminster Business School and formerly the chief
economist of the OECD, decided to scrutinize
the IPCC's economic assumptions
.  They found that the IPCC had made a
fundamental mistake in crafting their econometrics, one that caused all of
their economic growth estimates (and therefore estimates of CO2 production) to
be grossly overestimated.  Based on the IPCC assumptions, South Africa
ends up with a GDP per capita far in excess of the United States by the year
2100.  Incredibly, the IPCC numbers imply that Algeria, Argentina, Libya,
Turkey, and North Korea will all pass the US in per capita income by the end of
the century.

Beyond making it clear that there is an element of the absurd in the IPCC's
economic forecasting approach, these errors tend to inflate CO2 forecasts in
two ways.  First, CO2 forecasts are raised because, in the models, larger
economies produce more CO2.  Second, though, the models assume different
rates for CO2 production per unit of GDP for each country.  Most of the
countries the IPCC shows growing so fast "“ Algeria, South Africa, Libya, North
Korea, etc. "“ have lower than average CO2 efficiencies (i.e. higher than
average CO2 production per unit of GDP), so excess growth assumptions in these
countries has a disproportionate impact on projected CO2 emissions.  By
the way, it would be interesting to see if the IPCC is using marginal rather
than average rates.  For example, France has a very low average rate of
CO2 per unit of GDP because of its nukes, but its marginal growth is met mostly
with fossil fuels.

I can't say whether these same mistakes exist in the 2007 4th
Assessment.  However, since the IPCC flatly rejected Castles and
Henderson's critique, it is likely the same methodology was used in 2007 as in
2001.  For example, here are the CO2 emissions forecasts from the 4th
assessment "“ notice most all of them have a step-change increase in slope
between history and the future.  Just look at the jump across the dotted
line in lead case A1B, and several are even steeper.

So what does this mean?  Remember, small changes in growth rate make
big differences in end values.  For example, below are the IPCC fourth
assessment results for CO2 concentration.  If CO2 concentrations were to
increase at about the same rate as they are today, we would expect an end value
in 2100 of between 520 and 570 ppm, as opposed to the IPCC numbers below where
the projection mean is over 800 in 2100.  The difference is in large part
in the economic growth forecasts. 

Since it is not at all clear that the IPCC has improved its forecasting
methodology over the past years, it is instructive as one final exercise to go
back to the 1995 emissions scenarios in the 2nd assessment.
Though the scale is hard to read, one thing is clear "“ only 10 years later we
are well below most of the forecasts, including the lead forecast is92a (this
over-forecasting has nothing to do with Kyoto, the treaty's impact has been
negligible, as will be discussed later).  One can be assured that if the
forecasts are already overstated after 10 years, they will be grossly
overstated in 100.

Climate Sensitivity
and the Role of Positive Feedbacks

As discussed earlier, climate sensitivity generally refers to the expected
reaction of global temperatures to a arbitrary change in atmospheric CO2
concentration.  In normal usage, it is usually stated as degrees Celsius
of global warming from a doubling in CO2 concentrations from pre-industrial
levels (approx 280 ppm to 560 ppm).  The IPCC and most AGW supporters put
this number at about 3.5 to 4.0 degrees C. 

But wait "“ earlier I said the number was probably more like 1.0C, and that
it was a diminishing return.  Why the difference?  Well, it has to do
with something called feedback effects.

Before I get into these, let's think about a climate sensitivity of 4
degrees C, just from a historical standpoint.  According to the IPCC, CO2
has increased by about 100ppm since 1880, which is about 36% of the way to a
doubling.  Over this same time period, global temperatures have increased
about 0.7C. Since not even the most aggressive AGW supporter will attribute all
of this rise to CO2 levels, let's be generous and credit CO2 with 0.5C.
So if we are 36% of the way to a doubling, and giving CO2 credit for 0.5
degrees, this implies that the sensitivity is probably not more than 1.4
degrees C.  And we only get a number this high if we assume a linear
relationship "“ remember that CO2 and temperature are a diminishing return
relation (chart at right), so future CO2 has less impact on temperature than
past CO2, so 1.4 would be at the high end.  In fact, using the logarithmic
relationship we saw before, 0.5 degrees over 36% of the doubling would imply a
sensitivity around 1.0.  So, based on history, we might expect at worst
another 0.5C from warming over the next century. 

Most AGW supporters would argue that the observed sensitivity over the last
30 years has been suppressed by dimming/sulfate aerosols.  However, to get
a sensitivity of 4.0, one would have to assume that without dimming, actual
warming would have been about 2.0C.  This means that for the number 4.0 to
be right,

1. Absolutely nothing else other than CO2 has been causing warming in the
last 50 years AND

2. Sulfate aerosols had to have suppressed 75% of the warming, or about
1.5C, numbers far larger than I have seen anyone suggest.  Remember that
the IPCC classifies our understanding of this cooling effect, if any, as "low"

But in fact, even the IPCC itself admits that its models assume higher
sensitivity than the historically observed sensitivity.  According to the
fourth IPCC report, a number of studies have tried to get at the sensitivity
historically (going back to periods where SO2 does not cloud the picture).
  Basically, their methodology is not much different in concept than
the back of the envelope calculations I made above.

These are shown in a) below, which shows a probability distribution of what
sensitivity is (IPCC4 p. 798). Note many of the highest probability values of
these studies are between 1 and 2.  Also note that since CO2 content is,
as the IPCC has argued, higher than it has been in recorded history, any
sensitivities calculated on historical data should be high vs. the sensitivity
going forward.  Now, note that graph c) shows how a number of the climate
models calculate sensitivity.  You can see that their most likely values
are consistently higher than any of the historical studies from actual
data.  This means that the climate models are essentially throwing out
historical experience and assuming that sensitivity is 1.5 to 2 times higher
going forward, despite the fact a diminishing return relationship says it
should be lower.


Sensitivity, based on History






Sensitivity that is built into the models  (Sorry, I still have no idea
what "constrained by climatology" means, but the text of the report makes it clear
that these sensitivities popped out of climate models




So how do these models get to such high sensitivities?  The answer, as
I have mentioned, is positive feedback.

Let me take a minute to discuss positive feedbacks.  This is something
I know a fair amount about, since my specialization at school in mechanical
engineering was in control theory and feedback processes.  Negative
feedback means that when you disturb an object or system in some way, forces
tend to counteract this disturbance.  Positive feedback means that the
forces at work tend to reinforce or magnify a disturbance.

You can think of negative feedback as a ball sitting in the bottom of a
bowl.  Flick the ball in any direction, and the sides of the bowl,
gravity, and friction will tend to bring the ball back to rest in the center of
the bowl.  Positive feedback is a ball balanced on the pointy tip of a
mountain.  Flick the ball, and it will start rolling faster and faster
down the mountain, and end up a long way away from where it started with only a
small initial flick.

Almost every process you can think of in nature operates by negative
feedback.  Roll a ball, and eventually friction and wind resistance bring
it to a stop.  There is a good reason for this.  Positive feedback
breeds instability, and processes that operate by positive feedback are
dangerous, and usually end up in extreme states.  These processes tend to
"run away."   I can illustrate this with an example:
Nuclear fission is a positive feedback process.  A high energy neutron
causes the fission reaction, which produces multiple high energy neutrons that
can cause more fission.  It is a runaway process, and it is dangerous and
unstable.  We should be happy there are not more positive feedback
processes on our planet.

Since negative feedback processes are much more common, and since positive
feedback processes almost never yield a stable system, scientists assume that
processes they meet are negative feedback until proven otherwise.  Except
in climate, it seems, where everyone assumes positive feedback is common.

In global warming models, water vapor plays a key role as both a positive
and a negative feedback loop to climate change.  Water vapor is a far more
powerful greenhouse gas than CO2, so its potential strength as a feedback
mechanism is high.  Water comes into play because CO2 driven warming will
put more water vapor in the atmosphere, because greater heat will vaporize more
water.  If this extra vapor shows up as more humid clear air, then this in
turn will cause more warming as the extra water vapor absorbs more energy and
accelerates warming.  However, if this extra water vapor shows up as
clouds, the cloud cover will tend to reflect energy back into space and retard
temperature growth. 

Which will happen?  Well, nobody knows.  The IPCC4 report admits
to not even knowing the sign of water's impact (e.g whether water is a
net positive or negative feedback) in these processes.  And this is just
one example of the many, many feedback loops that scientists are able to posit
but not prove. And climate scientists are coming up with numerous other
positive feedback loops.  As
one author put it

Regardless, climate models are made interesting by
the inclusion of "positive feedbacks" (multiplier effects) so that a
small temperature increment expected from increasing atmospheric carbon dioxide
invokes large increases in water vapor, which seem to produce exponential
rather than logarithmic temperature response in the models. It appears to have
become something of a game to see who can add in the most creative feedback
mechanisms to produce the scariest warming scenarios from their models but
there remains no evidence the planet includes any such effects or behaves in a
similar manner.

Note that the majority of the warming in these models appears to be from
these feedback processes.  Though it is hard to pick it out exactly,
section 8.6 of the fourth IPCC report seems to imply these positive feedback
processes increase temperature 2 degrees for every one degree from CO2.
This explains how these models get from a sensitivity of CO2 alone of about 1.0
to 1.5 degrees to a sensitivity of 3.5 or more degrees "“ it's all in the
positive feedback.

So, is it reasonable to assume these feedback loops?
First, none have really been proven empirically, which does not of course
necessarily make them wrong. .  In our daily lives, we generally deal
with negative feedback:  inertia, wind resistance, friction are all negative
feedback processes.  If one knew nothing else, and had to guess if a
natural process was governed by negative or positive feedback, Occam's razor
would say bet on negative.   Also, we will observe in the next
section that when the models with these feedbacks were first run against
history, they produced far more warming than we have actually seen (remember
the analysis we started this section with "“ post-industrial warming implies
1-1.5 degrees sensitivity, not four).

Perhaps most damning is to ask, if this really is such a heavily positive
feedback process, what stops it?  Remember the chart from earlier (show
again at the right), showing the long-term relationship of CO2 and
warming.  Also remember that the data shows, and even AGW supporters
acknowledge, that temperature rises led CO2 rises by about 800 years.
Their explanation is that "something" caused the temperature to start
upwards.  This higher temperature, as it warmed the oceans, caused CO2 to
outgas from the oceans to the atmosphere.  Then, this new CO2 caused the
warming to increase further.  In other words, outgassing CO2 from the
oceans was a positive feedback to the initial temperature perturbation.
In turn, the IPCC argues there are various other positive feedbacks that
multiply the effect of the additional warming from the CO2.  This is
positive feedback layered on positive feedback.  It would be like barely
touching the accelerator and having the car start speeding out o f control.

So the question is, if global temperature is built on top of so many positive
feedbacks and multipliers, what stops temperature form rising once it
starts?  Why didn't the Earth become Venus in any of these events?
Because, for whatever else it means, the chart above is strong evidence that
temperature does not run away. 

I have seen two suggestions, neither of which is compelling.  The first
is that the oceans ran out of CO2 at some point.  But that makes no
sense.  We know that the oceans have far more CO2 than could ever be
liberated entirely to the atmosphere today, and besides,  the record above
seems to claim that CO2 in the atmosphere never really got above there it was
say in 1880.

The second suggestion is based on the diminishing return relationship of CO2
to temperature.  At some point, as I have emphasized many times, CO2's
ability to absorb infrared energy is saturated, and incremental quantities have
little effect.  But note in the IPCC chart above, CO2 on the long time
scale never gets as high as it is today.  If you argue that CO2's
absorption ability was saturated in earlier events, then you have to argue that
it is saturated today, and that incremental CO2 will have no further warming
effect, which AGW supporters are certainly NOT arguing.  Any theory based
on some unknown negative feedback has to deal with the same problem:  If
one argues that this negative feedback took over at the temperature peaks (in
black) doesn't one also have to argue that it should be taking over now at our
current temperature peak?  The pro-AGW argument seems to depend on an assumption
of negative feedbacks in the past that for some reason can't be expected to
operate now or in the future.  Why?

In fact, we really have not seen any evidence historically of these positive
feedback multipliers.  As I demonstrated at the beginning of this chapter,
even assigning as much as 0.5C of the 20th century temperature
increase to CO2 only implies a sensitivity just over 1.0, which is about what
we would expect from CO2 alone with no feedbacks.  This is at the heart of
problems with AGW theory "“ There is no evidence that climate sensitivity to CO2
is anywhere near large enough to justify the scary scenarios spun by AGW
supporters nor to justify the draconian abatement policies they advocate.

My tendency is to conclude that in fact, positive feedbacks do not dominate
climate, just as they do not dominate any long-term stable system.  Yes,
certain effects can reasonably be said to amplify warming (ice albedo is
probably one of them) but there must exist negative feedbacks that tend to damp
out temperature movements.  Climate models will never be credible, and
will always overshoot, until they start building in these offsetting forcings.

Climate Models had
to be aggressively tweaked to match history

A funny thing happened when they first started running climate
models with high CO2 sensitivities in them against history:  The models
grossly over-predicted historic warming.  Again, remember our previous
analysis "“ historical warming implies a climate sensitivity between 1 and
1.5.  It is hard to make a model based on a 3.5 or higher sensitivity fit
that history.  So it is no surprise that one can see in the IPCC chart
below that the main model cases are already diverging in the first five years
of the forecast period from reality, just like the Superbowl predictors of the
stock market failed four years in a row.  If the models are already high
by 0.05 degree after five years, how much will they overshoot reality over 100

In a large sense, this is why the global climate community has latched onto
the global dimming / aerosols hypothesis so quickly and so strongly.  The
possible presence of a man-made cooling element in the last half of the 20th
century, even one that the IPCC fourth report ranks our understanding of as
"low," gives modelers a valuable way to explain why their models are
overstating history.  The aerosols hypothesis is valuable for two reasons:

· Since
SO2 is prevalent today, but is expected to go down in the future, it allows
modelers to forecast much higher warming and climate sensitivity in the future
than has been observed in the past.

· Our
very lack of understanding of the amount, if any, of such aerosol cooling is
actually an advantage, because it allows modelers to set the value of such
cooling at whatever value they need to make their models work

I know the last statement seems unfair, but in reading the IPCC and other
reports, it appears to me that aerosol cooling values are set in exactly this
way "“ as what we used to call a "plug" figure between actual temperatures and
model output.  While this may seem a chancy and fairly circular reasoning,
it makes sense for scientists because they trust their models.  They
really believe the outputs are correct, such that any deviation is not
attributed to their assumptions about CO2 or climate sensitivity, but to other
man-made effects.

But sulfates are not the only plug being used to try to make high
sensitivity models match a lower sensitivity past.  You can see this in
the diagram below from the fourth IPCC report.  This is their summary of
how their refined and tweaked models match history. 


The blue band is without anthropogenic effects.
The pink band is with anthropogenic effects, including warming CO2 and cooling
aerosols.  The black line is measured temperatures (smoothed out of





You can see the pink band which represents the models with anthropogenic
effects really seems to be a lovely fit, which should make us all
nervous.  Climate is way too chaotic a beast to be able to model this
tightly.   In fact, given uncertainties and error bars on our
historical temperature measurements, climate scientists are probably trumpeting
a perfect fit here to the wrong data.  I am reminded again of a beautiful
model for presidential election results with a perfect multi-decadal fit based
on the outcome of NFL football games. 

But ignoring this suspiciously nice fit, take a look at the blue bar.
This is what the IPCC models think the climate would be doing without
anthropogenic effects (both warming CO2 and cooling sulfates, for
example).  With the peaked shape (which should actually be even more
pronounced if they had followed the mid-century temperature peak to its max)
they are saying there is some natural effect that is warming things until 1950
and then turns off and starts cooling, coincidently in the exact same year
that anthropogenic effects start taking off. 
I challenge you to read
the IPCC assessment, all thousand or so pages, and find anywhere in that paper
where someone dares to say exactly what this natural effect was, or why it
turned off exactly in 1950. 

The reality is that this natural effect is another plug.  There is no
actual empirical data to back up the blue line (in fact, as we will see in the
alternate theories section, there is good empirical data that this blue band is
wrong).  Basically, climate scientists ran their models against history,
and found that even with their SO2 plug, they still didn't match well "“ they
were underestimating early century warming and over-estimating late century
warming.  Remember that the scientists believe their models and their
assumptions about a strong CO2 effect, so they have modeled the non-anthropogenic
effect by running their models, tuning them to historical actuals, and then
backing out the anthropogenic forcings to see what is left.  What is left,
the plug figure, is the blue line.

Already, the models used by the IPCC tend to overestimate past warming even
if all past warming is attributable to anthropogenic causes.  If
anthropogenic effects explain only a fraction of past warming, then the current
models are vastly overstated, good for stampeding the populous into otherwise
unpopular political control over the economy, but of diminished scientific

The note I will leave you with is this:  Do not gain false confidence
in the global climate models when they show you charts that their outputs run
backwards closely match history.  This is an entirely circular argument,
because the models have been built, indeed forced, to match history, with
substantial plug figures added like SO2 effects and non-anthropogenic climate
trends, effects for which there are no empirical numbers.

The table of contents for the rest of this paper, . 4A Layman's Guide to Anthropogenic Global Warming (AGW) is here Free pdf of this Climate Skepticism paper is here and print version is sold at cost here

The open comment thread for this paper can be found here. 

Social Security: Some Advice

MaxedOutMamma has a pretty good overview post on the economics of funding Social Security and Medicare over the next 30 years or so. 

So the real issue is not
those fictional bonds in the surreal trust fund. The real issue is
whether the American taxpayer will be able to pay for all its current
programs as well as Social Security and Medicare without paying double
or triple the percentage in income taxes the American taxpayer is
paying now. Because that is not going to happen. Forget all this
jibber-jabber about moral issues. That is not going to mean a thing to
the man earning the equivalent of $28,000 today in 2023 when he is
asked to pay much more of that money so that some 67 year old with
several millions of assets can get his or her scheduled Social Security

Nothing really new here, but the picture is always worth reviewing (she has lots of nice graphs showing the coming spending overhang).  Politicians' ignorance of (and ignoring of) this problem would shock me if I had any regard left at all for politicians.   I wanted to offer some random observations:

  1. If you are below 50 and in the top 40% of earners, do NOT expect to get any Social Security benefits.  Live with it.  Up until now, wealthy people have received SS retirement benefits as an expensive PR campaign to convince everyone that SS is an insurance program, not a welfare program.  Well, I have run the numbers, and it is at least 83% welfare.  The only alternative to defending these benefits will be to suffer through substantial tax increases which will be disproportionately paid for by the same richest 40% who would lose their benefits.  Given the negative rates of return that SS pays on your payroll taxes, each extra dollar that taxes are raised will only yield well under a dollar (present value) in benefits. So give up on the benefits, campaign to keep taxes down, and start saving on your own.
  2. If you have some control of when you you earn your lifetime income, try to earn as much as you can in the next 10-15 years.  After that, taxes are almost sure to go up substantially.  It would not surprise me to see top marginal rates back well above 50% again.
  3. Democrats in Congress are pushing for new welfare programs, particularly socialized medicine, right now because they must understand that in 10 years, the window for major new spending programs will be closed.  The pressures in a decade will be for program cutbacks as costs really start to balloon, and I can't imagine that new transfer programs will be taken seriously as the old ones eat up a larger and larger part of GDP.  Of course, my point is that this is the last time that such a program would be politically feasible.  From a financial management point of view, we are past the point where adding major new social programs makes any sense.  In fact, adding such a program now would be like a guy who has gotten over his head and knows he can't pay his credit card bills taking his last money out of the bank and buying a plasma TV.

Manufacturing Jobs Myth

From TJIC:

"America cannot be great if most of its workers are in the service
sector"¦" Senator Byron Dorgan (D-North Dakota) declares in his book
"Take This Job and Ship It,""¦

This typical reading of historic manufacturing and service jobs stats is ignorant.  My first rule of quoting a statistic, which I admit I sometimes violate, is to make sure you understand how it is calculated.  Nothing could be truer than with manufacturing jobs statistics.

The best way to illustrate this is by example.  Let's takean automobile assembly plant circa 1955.  Typically, a large manufacturing plant would have a staff to do everything the factory needed.  They had people on staff to clean the bathrooms, to paint the walls, and to perform equipment maintenance.  The people who did these jobs were all classified as manufacturing workers, because they worked in a manufacturing plant.  Since 1955, this plant has likely changed the way it staffs these type jobs.  It still cleans the bathrooms, but it has a contract with an outside janitorial firm who comes in each night to do so.  It still paints the walls, but has a contract with a painting contractor to do so.  And it still needs the equipment to be maintained, but probably has contracts with many of the equipment suppliers to do the maintenance.

So, today, there might be the exact same number of people in the factory cleaning bathrooms and maintaining equipment, but now the government classifies them as "service workers" because they work for a service company, rather than manufacturing workers.  Nothing has really changed in the work that people do, but government stats will show a large shift from manufacturing to service employment.

Is this kind of statistical shift really worth complaining about?  By complaining about the shift of jobs from manufacturing to services, you are first and foremost complaining about a chimera that is an artifact of how the statistics are compiled.  So if we were to correct for this, would manufacturing jobs be up or down?  I don't know, but given on the wailing about "shrinkage" of manufacturing in the US, I bet you would not have guessed this:

Considering total goods production (including things like mining and
agriculture in addition to manufacturing), real goods production as a
share of real (inflation-adjusted) Gross Domestic Product (GDP) is
close to its all-time high.

  • In the second quarter of 2003, real goods
    production was 39.2 percent of real GDP; the highest annual figure ever
    recorded was 40 percent in 2000. See the Figure.

  • By
    contrast, in the "good old days" of the 1940s, 1950s and 1960s, the
    United States actually produced far fewer goods as a share of total
    output, reaching 35.5 percent in the midst of World War II.

So manufacturing is close to an all time high as a percentage of the economy.  There is absolutely no way anyone who looks at this graph can, with a straight face, talk about the "shrinking" of America's manufacturing sector.   If manufacturing employment is somehow down vs. some historical "norm", then that means that manufacturing productivity has gone up faster than service productivity.  So what?  And to the extent there has been a shift, as TJIC writes, who cares?

Yeah, we hates the service sector.

Who needs lawn care, child care, food preparation, legal
services, stockbrokers, professors, blogs, actors, and contract
software engineers ?

Let's get everyone involved in good 19th century atoms-and-mortar activities like raising corn and smelting iron.

Sure, some flakes argue "those are jobs for machines", but we
aim to recapture the glory of our national greatness, when men were
men, women were women, America was strong, and the average life lasted
50 years and ended with pneumonia, a threshing accident, or a crushing

The same populists who complain today about the shift from manufacturing to services complained a hundred years ago about the shift from agriculture to manufacturing.  And I am sure all of us would much rather be waking up with the sun each day to push a plow.

The Flip Side of the Trade Deficit

I originally got to this post at Carls Talk because of the cool map I put in this post.  However, I was really struck by his lament that foreign companies won't sell into Norway because it is too small.  Given that Norway has a trade surplus, you would think that given all the whining in the US about trade deficits that everything would be hunky-dory in Norway and that they would be thrilled that foreign companies wouldn't sell there.  But check this out:

When seeing Norway's GDP in the context of this map, one realizes
why Norway often is one of the last countries U.S. companies consider when
expanding to Europe.

Norway might be an unattractive market when considering expansion
because the market is so small and as a result there is little domestic
competition.  This  has enabled local players to
build monopolies or duopolies with substantial  entry-barriers in many
industries.  Furthermore, the government has sheltered the domestic
market against international competition by adding a hefty import tax
and inconvenient delivery methods on goods purchased outside the
country, rendering international online merchants at a disadvantage
when competing on price and convenience.

On the flip side, if you manage to establish your business here, you
can overcharge your customers and get away with horrendous customer
service.  The average Norwegian customer is not used to good service
and competitive prices.  Online merchants are slow.  Recently it took
four weeks before I received a book shipped to me from a local
merchant.  On a recent trip I recently purchased shoes for our kids in
the U.S.  The selection was superior, and the price:  1/4th of what the
local Norwegian merchant was charging. 

Gee, you mean there is a price consumers pay for protectionism that might offset a few job gains in sugar growing and textiles?

Cool Map

I am having trouble tracing this map all the way to its source, but I thought it was cool enough to show here (via TJIC and Carls Blog).  The map renames each state with a country that has approximately the same GDP as that state.



Check out Russia / New Jersey.  And is it really saying New Zealand and the District of Columbia have the same GDP?

Update:  If you enjoyed this post, check out our (free) comprehensive
guide to the skeptics arguments concerning man-made global warming.

An Absurd Demand

Today, Microsoft came under fire from a number of activists:

Activists today accused Microsoft of spending all of its time focusing on software.  "All they want to do is write code for operating systems and applications".  Activists were complaining that Microsoft does not invest any of its huge profits into alternatives to software and operating systems.  "They have not invested one dime in trying to come up with computing technologies that don't require operating systems or business applications."  Activists also accused Microsoft of not investing in any alternative computational approaches, such as abacus research or mechanical calculators.

Makes no sense, right?  Well, that's because I made it up.  But I did not make this up, which is essentially the exact same charge, just against a different target:

other major oil companies that essentially acknowledge the very real
threat of global warming and the need to transition to renewable energy
and off of a finite, non-renewable resource such as oil, ExxonMobil is
using its profits and its power to continue to keep this country
addicted to oil, as President Bush has noted," Hoover said.

ExxonMobil cares only about drilling for more oil, Hoover alleged

You hear this stuff all the time.  But why are the major oil companies responsible for investing to obsolete their own business?  Why are they obligated to invest in things like wind farms or whatever that they know nothing about?   Did we demand that railroads invest in aircraft research?  Do we require cable companies to invest in DirectTV?  For all of its size, ExxonMobil represents a tiny fraction of World GDP -- if all these alternative energy ideas are such great opportunities, let the other 99.99% of the world economy take it on.  Besides, do these guys who think that XOM is evil incarnate really want them controlling the next generation of energy production?

By the way, I thought this was hilarious:

believe that ExxonMobil -- primarily through its former president and
CEO, Lee Raymond -- has been involved in conceiving of and then
promoting the invasion and occupation of Iraq," Reed said. "When the
Iraq war was being cooked up, we think ExxonMobil was in the kitchen."

I love the "we believe" part.  I am sure that half these folks also "believe" that aliens are alive and well in Area 51 and that George Bush was behind the 9/11 attacks.  Would it be too much to ask to bring some facts to the table?  Or how about even a motive?  I could maybe come up with a motive if the US invaded Nigeria, since Exxon has assets at risk there that are threatened by rebels and general chaos, but Iraq?  Since Iraq's output was limited before the invasion, invading Iraq only served to put more oil on world markets, which would depress rather than raise prices and profits.  In fact, if there was really an evil genius oil company pulling the strings of government to maximize their own profits, UN-sanctioned Iraq would be just about the last oil producing country in the world you would want your government puppets to invade.

Today XOM has its annual shareholder meeting, and if you ever want to see a great parade of barking moonbats, buy yourself a share of XOM and attend.  Lee Raymond caught a lot of grief for his compensation package, and it did seem overly generous to me, but I am not an XOM shareholder right now so its not my concern.  I will say that having seen one of the XOM shareholder meetings and the ridiculous grief the CEO must endure for a day, my guess is that the XOM CEO would likely knock several million dollars off his comp. package if he could call in sick today.

More on Massachusetts Health Insurance

I loved this email received at Maggie's Farm:

What are you guys smoking over there? Here I am in Massachusetts,
without health insurance, and with a family of four, and all that has
happened is on top of having to pay full freight for my family's doctor
bills, I get fined $1000.00 for the privelege.

I don't want
your stinking welfare greenstamp department of motor vehicle government
cheese copay paperwork foodstamp prepaid doctor tax charity ward let a
million flowers bloom supervision of my family's medical situation,
thank you very much.

Catastrophic medical insurance is
currently illegal in Massachusetts. All they had to do is allow me to
purchase what I could get if I lived 50 miles west, which is REAL LIVE
INSURANCE, that is, they would pay if something unexpected,
substantial, and expensive happened. And it would cost me a couple
hundred bucks a month. But no, I have to pay full freight for every
lamebrain thing that every knucklehead who has a job with benefits
wants tax free, like gym memberships and aromatherapy and acupuncture
and reiki massage and "mental health," ie, I'm a miserable failure as a
human being and I want to talk to another miserable failure that went
to community college for psychology about it, at great expense. Oh,
yes, let's not forget all middle age men that need free blue pills
because what a mean spirited thing it would be [if] middle age men didn't
wander the earth with extra free hardons.

And so "insurance"
becomes paying in advance for others to get what they don't need or
deserve, to the point where "Insurance" costs 1200 a month and if
something catastrophic did happen, would bankrupt me anyway, because
instead of paying $50 for an office visit for an imaginary ailment, but
having a real catastrophe paid for, the powers that be would prefer
paying $5 dollars copay for an office visit to their yogurt enema
wellness healer, but have to chip in 20% for cancer therapy, which
would bankrupt anybody that has to worry about the cost of health
insurance in the first place.

ROFL. I too am a big believer in catastrophic health insurance.  My home insurance does not cover broken light bulbs and leaky plumbing.  My car insurance does not cover air filters.  Why does my health insurance have to cover routine stuff?  I pay for my own health care and this is exactly how my family handles both dental and medical:  We pay regular visits but have catastrophic coverage for major health breakdowns. 

Jeez, I wish I had written that email and could take credit for it.  The blog does not reveal the emailer's identity, but whoever you are you're welcome to guest blog here any time.

Update: About a year ago, my family of four was quoted about $650 a month for the type of full (not catastrophic) medical insurance that the state of Mass. is requiring.  This is about $8000 a year.  This strikes me as by far the most expensive item that any US government has required its citizens to purchase, and given the average GDP of most nations, may be the most expensive item any government in history has required all of its citizens to purchase.  Up to this point, many municipalities have shied away from requiring purchase of $40 smoke detectors.  The only thing that is even within an order of magnitude of this is perhaps car insurance, but even car insurance is not required of every citizen, just the ones with cars (don't laugh, if car insurance laws followed the same logic as this health insurance bill, not having a car would not be a legal excuse for not having auto insurance.)

Update 2:  I am sure I will get the response, "but the supporters promise that the bill will halve the cost of private health insurance.  Right.  Here is a clue:  Except for the reform plan in California pushed by Gov. Arnold, every single state attempt to "reform" workers comp. has resulted in my premiums going up.  I am sure we are all holding our breath for the price drop in passenger rail service and first class mail. 

This plan removes the last people from the market who are price sensitive shoppers of individual medical services (i.e. those who pay expenses out of pocket rather than having them covered by medical insurance).  If you drive down the marginal cost to all consumers to the level of the copay from the much higher true-cost of the procedure, then you are going to get a lot more use of all medical procedures.  Higher use = higher cost.  Higher cost = higher premiums, even when spread over more people.

I am constantly stunned that this concept has to be explained to people.  Let's consider a test that costs $1000 to administer that can detect a very rare type of cancer that only occurs in 1 in 100,000 people.  Well, if they charged you anywhere near the $1000 cost, few people would choose to pay for a test to identify something so low-risk.  But if you could take the test for a $20 copay?  Sure doc, let's do it!  So the insurance pool has to fork over $1000 for a procedure that you might only value at $20.   Also see this post for more along the same lines.  And here too.

Physics, Wealth Creation, and Zero Sum Economics

You will have to forgive this post if it gets a little long or theoretical.  Yesterday I made the mistake of going jogging when it was still 114 degrees outside, and I guess I discovered why biblical prophets seem to always get their visions out in the desert.

One of the worst ideas that affect public policy around the world is that wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created.  G8 protesters who claim that poor nations are poor because wealthy nations have made them that way;  the NY Times, which for a number of weeks actively flogged the idea that the fact of the rich getting richer in this country somehow is a threat to the rest of us; Paul Krugman, who fears that economic advances in China will make the US poorer:  All of these positions rest on the notion that wealth is fixed, so that increases in one area must be accompanied by decreases in others.  Mercantilism, Marxism, protectionism, and many other destructive -isms have all rested on zero sum economic thinking.

My guess is that this zero-sum thinking comes from our training and intuition about the physical world.  As we all learned back in high school, nature generally works in zero sums.  For example, in any bounded environment, no matter what goes on inside (short of nuclear fission) mass and energy are both conserved, as outlined by the first law of thermodynamics.  Energy may change form, like the potential energy from chemical bonds in gasoline being converted to heat and work via combustion, but its all still there somewhere. 

In fact, given the second law of thermodynamics, the only change that will occur is that elements will end in a more disorganized, less useful form than when they started.  This notion of entropic decay also has a strong effect on economic thinking, as you will hear many of the same zero sum economics folks using the language of decay on human society.  Take folks like Paul Ehrlich (please).  All of there work is about decay:  Pollution getting worse, raw materials getting scarce, prices going up, economies crashing.  They see human society driven by entropic decline.

So are they wrong?  Are economics and society driven by something similar to the first and second laws of thermodynamics?  I will answer this in a couple of ways.

First, lets ask the related question:  Is wealth zero sum and is society, or at least the material portions of society, always in decline?  The answer is so obviously no to both that it is hard to believe that these concepts are still believed by anyone, much less a large number of people.  However, since so many people do cling to it, we will spend a moment or two with it.

The following analysis relies on data gathered by Julian Simon and Stephen Moore in Its Getting Better all the Time:  100 Greatest Trends of the Last 100 Years.  In fact, there is probably little in this post that Julian Simon has not said more articulately, but if all we bloggers waited for a new and fresh idea before we blogged, well, there would not be much blogging going on. 

Lets compare the life of an average American in 1900 and today.  On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly.  I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).

  • Life expectancy has increase from 47 to 77 years
  • Infant mortality rates have fallen from one in ten to one in 150.
  • Average income - in real dollars - has risen from $4,748 to $32,444

In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties.  Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation.  They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die. 

But what about the poor?  Well, the poor are certainly wealthier today than the poor were in 1900.  But in many ways, the poor are wealthier even than the "robber barons" of the 19th century.  Today, even people below the poverty line have a good chance to live past 70.  99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator.  95% have a TV, 88% have a phone, 71% have a car, and 70% have air conditioning.  Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life.

To anticipate the zero-summer's response, I presume they would argue that the US somehow did this by "exploiting" other countries.  Its hard to imagine the mechanism for this, especially since the US did not have a colonial empire like France or Britain, and in fact the US net gave away more wealth to other nations in the last century (in the form of outright grants as well as money and lives spent in their defense) than every other nation on earth combined.  I won't go into the detailed proof here, but you can do the same analysis we did for the US for every country in the world:  Virtually no one has gotten worse, and 99.9% of the people of the world are at least as wealthy (again in the broad sense) or wealthier than in 1900.  Yes, some have slipped in relative terms vs. the richest nations, but everyone is up on an absolute basis.

Which leads to the obvious conclusion, that I shouldn't have had to take so much time to prove:  The world, as a whole and in most of its individual parts, is wealthier than in was in 1900.  Vastly more wealthy.  Which I recognize can be disturbing to our intuition honed on the physical world.  I mean, where did the wealth come from?  Out of thin air?  How can that be?

Interestingly, in the 19th century, scientists faced a similar problem in the physical world in dating the age of the Earth.  There was evidence all around them (from fossils, rocks, etc) that the earth had to be hundreds of millions, perhaps billions of years old.  The processes of evolution Darwin described had to occur over untold millions of years.  Yet no one could accept an age over a few million for the solar system, because they couldn't figure out what could fuel the Sun for longer than that.  Every calculation they made showed that by any form of combustion they understood, the sun would burn out in, at most, a few tens of millions of years.  If the sun and earth was so old, where was all that energy coming from?  Out of thin air?

It was Einstein that solved the problem.  E=mc2 meant that there were new processes (e.g. fusion) where very tiny amounts of mass were converted to unreasonably large amounts of energy.  Amounts of energy so large that it tends to defy human intuition.  Here was an enormous, really huge source of potential energy that no one before even suspected.

Which gets me back to wealth.  To balance the wealth equation, there must be a huge reservoir out there of potential energy, or I guess you would call it potential wealth.  This source is the human mind.  All wealth flows from the human mind, and that source of energy is also unreasonably large, much larger than most people imagine.

But you might say - that can't be right.  What about gold, that's wealth isn't it, and it just comes out of the ground.  Yes, it comes out of the ground, but how?  And where?   If you have ever traveled around the western US, say in Colorado, you will have seen certain hills covered in old mines.  It always fascinated me, how those hills riddled with shafts looked, to me, exactly the same as the 20 other hills around it that were untouched.  How did they know to look in that one hill?  Don Boudroux at Cafe Hayek expounded on this theme:

I seldom use the term "natural resource." With the possible
exception of water, no resource is natural. Usefulness is not an
objective and timeless feature ordained by nature for those scarce
things that we regard as resources. That is, all things that are
resources become resources only after individual human beings
creatively figure out how these things can be used in worthwhile ways
for human betterment.

Consider, for example, crude oil. A natural resource? Not at all. I
suspect that to the pre-Columbian peoples who lived in what is now
Pennsylvania, the inky, smelly, black matter that oozed into creeks and
streams was a nuisance. To them, oil certainly was no resource.

Petroleum's usefulness to humans "“ hence, its value to humans "“ is
built upon a series of countless creative human insights about how oil
can be used and how it can be cost-effectively extracted from the
earth. Without this human creativity, oil would objectively exist but
it would be either useless or a nuisance.

A while back, I published this anecdote which I think applies here:

Hanging out at
the beach one day with a distant family member, we got into a
discussion about capitalism and socialism.  In particular, we were
arguing about whether brute labor, as socialism teaches, is the source
of all wealth (which, socialism further argues, is in turn stolen by
the capitalist masters).  The young woman, as were most people her age,
was taught mainly by the socialists who dominate college academia
nowadays.  I was trying to find a way to connect with her, to get her
to question her assumptions, but was struggling because she really had
not been taught many of the fundamental building blocks of either
philosophy or economics, but rather a mish-mash of politically correct
points of view that seem to substitute nowadays for both.

picked up a handful of sand, and said "this is almost pure silicon,
virtually identical to what powers a computer.  Take as much labor as
you want, and build me a computer with it -- the only limitation is you
can only have true manual laborers - no engineers or managers or other
capitalist lackeys".

replied that my request was BS, that it took a lot of money to build an
electronics plant, and her group of laborers didn't have any and
bankers would never lend them any.

told her - assume for our discussion that I have tons of money, and I
will give you and your laborers as much as you need.  The only
restriction I put on it is that you may only buy raw materials - steel,
land, silicon - in their crudest forms.  It is up to you to assemble
these raw materials, with your laborers, to build the factory and make
me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how.  I need someone to tell me how to do it"

The only real difference between beach sand, worth $0, and a microchip, worth thousands of dollars a gram, is what the human mind has added.

The economist Julian Simon is famous for his rebuttals of the zero summers and the pessimists and doom sayers, arguing that the human mind has unlimited ability to bring plenty our of scarcity.

"The ultimate resource is people - especially skilled, spirited, and hopeful young people endowed with liberty- who will exert their wills and imaginations for their own benefit, and so inevitably benefit not only themselves but

the rest of us as well."

As a final note, it is worth mentioning that the world still has only harnessed a fraction of this potential.  To understand this, it is useful to look back at history.

From the year 1000 to the year 1700, the world's wealth, measured as GDP per capita, was virtually unchanged.
Since 1700, the GDP per capita in places like the US has risen, in real
terms, over 40 fold.  This is a real increase in total wealth, created by the human mind.  And it was unleashed because the world began to change in some fundamental ways around 1700 that allowed the human mind to truly flourish.  Among these changes, I will focus on two:

  1. There was a philosophical and intellectual
    change where questioning established beliefs and social patterns went
    from being heresy and unthinkable to being acceptable, and even in
    vogue.  In other words, men, at first just the elite but soon everyone,
    were urged to use their mind rather than just relying on established
  2. There were social and political changes that greatly increased
    the number of people capable of entrepreneurship.  Before this time,
    the vast vast majority of people were locked into social positions that
    allowed them no flexibility to act on a good idea, even if they had
    one.  By starting to create a large and free middle class, first in the
    Netherlands and England and then in the US, more people had the ability
    to use their mind to create new wealth.  Whereas before, perhaps 1% or
    less of any population really had the freedom to truly act on their
    ideas, after 1700 many more people began to have this freedom. 

So today's wealth, and everything that goes with it (from shorter
work hours to longer life spans) is the result of more people using
their minds more freely.

The problem (and the ultimate potential) comes from the fact that in many, many nations of the world, these two changes have not yet been allowed to occur.  Look around the world - for any country, ask yourself if the average
person in that country has the open intellectual climate that
encourages people to think for themselves, and the open political and
economic climate that allows people to act on the insights their minds
provide and to keep the fruits of their effort.  Where you can answer
yes to both, you will find wealth and growth.  Where you answer no to
both, you will find poverty and misery.

Even in the US, regulation and the inherent conservatism of the bureaucracy slow our potential improvement.  Republicans block stem cell research, Democrats block genetically modified foods, protectionists block free trade, the FDA slows drug innovation, regulatory bodies of all stripes try to block new business models.

All over the world, governments shackle the human mind and limit the potnetial of humanity.

Best of Coyote V

Well, it worked for Johnny Carson, why not for me?  Instead of
leaving you with dead air (photons?) while I am knocking the rust off
my beer pong skills back at Princeton, I will share with you a few of
my favorite posts from my early days of blogging.  Since most of these
posts were viewed by about 5 people, there is a certain temptation to
just recycle them without attribution, given the unlikelihood of
getting caught.  Instead, though, I will share them as my best of

This post from last November was my first real research project I set for myself.  Today, there are a couple of flaws I see in it, and I would like to update it, but the results are still interesting.  Here is French vs. Anglo-American 'Imperialism'"

For some reason, a portion of our country has adopted France as the
standard bearer of "anti-imperialism" (or at least anti-US
imperialism). France publicly positions itself similarly, trying to
make itself the leader and counterweight to US "Imperialism". I will
leave aside for now the argument as to whether the US's recent actions
constitute "imperialism". I will instead focus on the French as a role

The first thing that struck me was how long the French tried
desperately to hold on to their colonial empire. Both the US and Great
Britain either liberated or came to an acceptable living arrangement
with their major colonies within a few years of the end of WWII. Both
seemed to come to terms with the fact that the colonial era was over.
The French, in contrast, were still involved in bloody conflicts in
Indochina and Algeria to retain their empire through the late 50's and
even into the early 60's.

So, I decided to do a little research to understand the relative
success of French and Anglo-American colonies. Of course, when judging
the success of a former colony, a lot of things come into play, and
certainly the freed colony must take a substantial amount of
responsibility for its own success and political freedom. However,
after a bit of research, it is instructive to see how well prepared for
independence Britain, France, and the US left their colonies. Did they
leave the country with democratic systems in place and a capable local
ruling class, or did they just suck the country dry and try to prevent
any locals from gaining any capability.

To make this analysis, I have selected a number of each country's
key colonies. Some of the smaller African and island nations have been
left out. I also realize that I left off some of the ex-British middle
eastern colonies, but I am too tired now to add them back in.

I have used two pieces of data to judge an ex-colony's success.
First is GDP per capita, corrected for purchasing power parity, found
in the 2003 CIA fact book via World Facts and Figures. The second is the Freedom index prepared by Freedom House.

The results are striking. When arrayed in order of GDP per
capita, ex-French colonies occupy only 4 of the top 25 spots. And, if
you leave out Louisiana and Quebec, which one can argue are much more
shaped by the US and British, and if you leave out Mexico, where there
is arguably little French influence and none in the last 150+ years,
then ex-French colonies occupy only 2 of the top 25 spots. When arrayed
by the Freedom Index, and again leaving out Quebec, Louisiana and
Mexico, ex-French colonies only occupy one of the top 25 spots! The
ex-French colonies occupy 14 of the bottom 20 poorest slots and 11 of
the bottom 15 least free slots.
Finally, one could argue that
none of the ex-French colonies have really grown up into world players,
while British colonies in America, Australia, India, South Africa,
Palestine (Israel) and even Egypt play a significant role on the world

Continue reading ‘Best of Coyote V’ »